Manila is the hottest luxury home market in the world, beating out the likes of Boston, Tokyo and Paris, property consultancy Knight Frank said.

Luxury prices shot up 11 per cent in 2018, as the capital city of the Philippines got a boost from a robust economy, shortage of luxury homes and increased appetite for them by wealthy foreigners living there.

The ranking of 100 cities is based solely on how much their luxury home prices increased last year.

The only other Asian city in the top 10 list was Singapore, where prices jumped 9.1 per cent.

Tokyo came in 11th, rising by 6.8 per cent; Paris, 19th, up by 5.3 per cent, and London, 91st, down by 4.4 per cent.

Beijing was tied for 25th place and was up by 4 per cent and ranked the highest among mainland China cities. Hong Kong was tied for 47th place, up by 1.8 per cent.

Luxury property is defined as the top 5 per cent of each market by value.

Ten US cities made the top 100 list. Boston came in first among US cities, in 8th place, with an 8.6 per cent gain, and San Francisco ranked 10th, with a 7.8 per cent rise.

Knight Frank cited Manila’s annual GDP of 6 per cent last year as one of the factors that “motivated some expatriates to grab a slice of real estate back home.”

The annual report aims to signal market opportunities to the consultancy's clients.

But even though Manila topped the list, its percentage rise was still considerably lower than previous top-performing markets, which grew by at least 21 per cent, Knight Frank said.

The slower growth in luxury home prices was attributed to the end of the ultra-low interest rates era that began boosting real estate markets globally in 2008.

“While Manila’s 11 per cent growth is far from the norm for the city, it confirms the theory that outliers are disappearing, and we are moving to a period of slower price growth. Within Asia-Pacific, a slowdown from a 4.9 per cent average growth rate in 2017 to 2.7 per cent in 2018 illustrates this trend,” said Nicholas Holt, Knight Frank Asia-Pacific head of research.

Philippine developers have been focusing on more affordable housing, where demand is deemed larger.

“There are only four luxury residential projects in the pre-selling stage. Target completions are within the next five years,” said Jan Paul Custodio, senior director for research and consultancy at Santos Knight Frank.

“Of the 700 units of luxury residential apartments floated, 93 per cent have already been absorbed as of 2018. Post-selling luxury projects, on the other hand, are 95 per cent sold, with less than 15 units available,” he added.

“(The) decline is mainly attributed to the limited remaining inventory in the market,” Custodio said.

In late January, a new luxury project with 180 prime residential units broke ground, adding supply to the market. Makati, the premier business district, and neighbouring Bonifacio Global City, corner Manila's luxury market. The Estate Makati, a joint project of firms owned by the Philippines' two wealthiest families, is expected to command higher prices.

“The price increase was largest in Makati, where less than 1 per cent of floated inventory remains unsold,” Custodio said.

Demand, he said, is mainly coming from expatriates and high net worth locals.

On average, the 100 luxury residential markets tracked by Knight Frank's index rose 1.3 per cent in 2018, down from 2.1 per cent in 2017 and the index's lowest rate of annual growth since 2012.

Knight Frank said as markets wind down from low interest rates, lower price growth in real estate is inevitable.

Property consultancy CBRE said the Philippines positive economic story, whose economy has been rising by at least 6 per cent for 15 consecutive quarters now and is one of the fastest growing in the region, makes it an attractive investment site.

“In particular, the government's clear strategy and plans for infrastructure development in the city has given business confidence a huge boost,” said Desmond Sim, head of CBRE research, Southeast Asia.

“The Philippines is increasingly on the radar of mainland Chinese investors including high net worth individuals and corporate entities. With the continued pivot of Philippines toward China, we expect this group of foreign investors to grow in presence.

“Anecdotal data indicates that most of these buyers committed to their properties at developers' road shows abroad. This new source of demand is expected to shore up prices of condominiums across the mid to high-end market segments,” Sim said.